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Primis Financial Corp. (FRST)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 headline loss driven by consumer program winddown: net loss to common of $14.7M and diluted EPS of $(0.59), as the company moved $133M of third‑party consumer loans to held for sale and took $20.0M of marks and charge-offs . Underlying net interest margin would have been 3.18% excluding $2.5M of interest reversals; deposit cost fell 24 bps sequentially to 2.80%, with a further ~65 bps reduction on ~$1B of digital deposits repriced in Dec/Jan (≈$6.5M annual savings) .
  • Strategic repositioning: sale of Life Premium Finance (LPF) generated a $4.723M gain; mortgage warehouse launched (SOFR+340 bps yield), with 54 approved customers and >$400M of committed lines by end‑Jan 2025; 2025 mortgage production targeted at ~$1.25B .
  • Panacea Financial momentum: loans up to ~$434M (+11% q/q) and deposits ~$92M; management exploring deconsolidation to recognize economic value, believed above the ~$19.6M mark at 12/31/23 .
  • Capital return and listing: $0.10 dividend declared (53rd consecutive) and stock repurchase reauthorization (up to 740,600 shares); Nasdaq compliance regained with a one‑year panel monitor .

What Went Well and What Went Wrong

What Went Well

  • Deposit cost inflection and margin trajectory: “Cost of deposits decreased 24 basis points to 2.80%… [digital] deposit costs have declined by approximately 65 basis points… implying additional savings of approximately $6.5 million annually” . Ex‑reversal NIM would have been 3.18% vs 2.86% in Q4’23 .
  • Mortgage warehouse build and pricing: 54 approved customers, >$400M committed lines; average yield SOFR + 340 bps (Dec) . CEO: “We are positioned to push margins in the 3.25% to 3.50% range on this national strategy” .
  • Panacea expansion and value optionality: loans ~$434M and deposits ~$92M; management believes deconsolidation can unlock value above prior ~$19.6M mark; “we can probably move to… just deconsolidate it” .

What Went Wrong

  • Elevated credit costs from consumer program exit: Q4 provision $23.0M (vs $7.5M in Q3); consumer program drove $20.8M of provision and $30.5M of net charge‑offs, pushing NCO ratio to 3.84% (core NCO 0.05%) .
  • Noninterest expense spike: Q4 noninterest expense rose to $37.2M (from $31.0M in Q3), with core operating burden up $3.7M q/q to $23.5M, partly due to comp accruals, FDIC, consulting and tech implementation fees .
  • Net interest income compressed by transition: Q4 NII fell $1.9M q/q to $26.1M, impacted by $2.5M interest reversals on consumer charge‑offs and ~$1.3M decline tied to LPF sale; mortgage banking income fell $1.8M q/q on seasonal factors .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Interest Income ($USD Millions)$25.726 $28.023 $26.140
Noninterest Income ($USD Millions)$8.441 $9.283 $13.162
Total Revenue (NII + Noninterest) ($USD Millions)$34.167 $37.306 $39.302
Provision for Credit Losses ($USD Millions)$21.310 $7.511 $23.046
Net Income to Common ($USD Millions)$(8.171) $1.228 $(14.670)
Diluted EPS ($USD)$(0.33) $0.05 $(0.59)

Note: The Q3 2024 net income to common differs slightly between Q3 release ($1.212M) and Q4 tables updating prior quarters ($1.228M); table uses updated Q4 filing values .

Ratio/MarginQ4 2023Q3 2024Q4 2024
Net Interest Margin (%)2.86% 2.97% 2.91%
Cost of Deposits (%)2.69% 3.04% 2.80%
Efficiency Ratio (%)81.31% 82.98% 94.59%
Return on Average Assets (%)(0.85%) 0.12% (1.53%)

Segment/Line-of-Business Indicators

MetricQ4 2023Q3 2024Q4 2024
Mortgage Banking Income ($USD Millions)$3.210 $6.803 $5.140
Gain on Sale of Life Premium Finance ($USD Millions)$0.000 $0.000 $4.723
Consumer Program Derivative Income ($USD Millions)$2.886 $0.079 $0.928
Panacea Loans Outstanding ($USD Millions)N/A~$392 ~$434
Panacea Deposits ($USD Millions)N/A~$90 ~$92

Key Performance Indicators

KPIQ4 2023Q3 2024Q4 2024
Total Deposits ($USD Millions)$3,270 $3,306 $3,171
Demand Deposits (Noninterest Bearing) ($USD Millions)N/A$421 $439
Digital Accounts (Count)N/A>17,000 ~18,000
Digital Deposits ($USD Millions)N/A~$911 ~$981
Loans Receivable, Net ($USD Millions)$3,167 $2,923 $2,865
Net Charge-offs ($USD Millions)$7.642 $7.953 $30.951
Net Charge-offs / Avg Loans (Annualized) (%)0.94% 0.93% 3.84%
Allowance for Credit Losses / Loans (%)1.62% 1.72% 1.49%
Non-performing Assets / Total Assets (%)0.20% 0.25% 0.29%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core Operating Expense Burden ($21–$22M per quarter)FY 2025Not provided$21–$22M per quarterNew
Net Interest Margin (%)Exit FY 2025Not providedExpect closer to 3.50% upper end of 3.25–3.50%New
Mortgage Production ($USD Millions)FY 2025~2024 actual $800M~$1,250M run-rateRaised vs 2024
Mortgage Warehouse Commitments ($USD Millions)As of Jan 2025Not provided>$400M lines; 54 approved customersNew
Digital Deposit Cost Reduction (bps)FY 2025Not provided~65 bps reduction on $1B deposits ($6.5M annual savings)New
Dividend per Share ($USD)Q1 2025$0.10 (Q3/Q4 2024)$0.10; payable Feb 26, 2025Maintained
Panacea Deconsolidation/Value Recognition1H 2025$19.6M unrealized value (12/31/23)Management expects higher value; pursuing deconsolidationIncreased (management view)

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024 (Previous Mentions)Q4 2024 (Current Period)Trend
Consumer Loan ProgramSEC pre‑clearance ongoing; preliminary estimates disclosed Promo loans recognized; derivative income fell; provision $7.5M; consumer charge‑offs $6.7M Portfolio moved to held for sale; $20.8M provision/marks; NCOs $30.5M; exit underway Accelerated winddown; cleanup complete
Mortgage WarehouseNot highlightedTeam expansion; higher yields than LPF; NIM 2.97% 54 customers; >$400M lines; SOFR+340 bps yield; margin uplift plan Scaling rapidly
Net Interest MarginNIM 3.03% (prelim) NIM 2.97%; deposit remix Underlying NIM 3.18% ex reversals; guided to ~3.50% exit Improving
Digital Deposits/CostNot highlighted>17k accounts; $911M deposits ~18k accounts; $981M deposits; ~65 bps repricing saves ~$6.5M annually Improving cost/mix
Panacea FinancialConsolidated loss impact noted Loans ~$392M; deposits ~$90M; strong tech rollout Loans ~$434M; deposits ~$92M; deconsolidation to unlock value Growth/monetization
LPF SaleNot applicableAnnounced sale to EverBank; expected pre‑tax gain ~$4.5M Sale closed; net gain $4.723M; swap to warehouse asset class Transitioned

Management Commentary

  • CEO (Dennis Zember): “We are positioned to push margins in the 3.25% to 3.50% range on this national strategy with efficient platforms and safe short-term asset strategies” .
  • CEO: “Our moves in the fourth quarter neutralized $20 million of credit costs… that number moves to about $17 million annually once warehouse is at scale in ’25” .
  • CFO (Matt Switzer): “Without [consumer program] items, we would have made $7.1 million pretax… after the net impact of these items, the bank would have made approximately $6.2 million pretax in the fourth quarter” .
  • CFO on deposit rates: delays in digital platform repricing cost “another $1 million approximately of interest carry in the fourth quarter” .
  • CEO on Panacea deconsolidation: “I can just confidently say that it’s not less than what we did last time… I think we can probably move to… just deconsolidate it” .

Q&A Highlights

  • Loan growth outlook: Core bank pipeline doubled y/y; 2025 bank loan growth targeted $125–$175M; mortgage warehouse modeled to replace LPF ($300M) with larger long‑term potential .
  • NIM cadence: Management expects margin expansion through 2025, exiting near upper end of 3.25–3.50%, aided by lower deposit costs, warehouse/construction‑perm yields, and asset repricing .
  • Credit/Provision baseline: Core charge‑offs ~5–10 bps; warehouse reserve burden modeled ~15 bps; provision ~$1M per quarter near‑term .
  • Panacea value recognition: Deconsolidation (not monetization) under consideration to reflect higher valuation; operational steps required (employee/services transfer) .
  • Deposit mix strategy: Aim to grow core bank deposits to ~$2.5B in two years, with digital side remixing to more lower‑cost checking within existing ~$1B base .

Estimates Context

Consensus EPS and revenue estimates from S&P Global for FRST were not available at time of analysis due to an API rate limit error. As a result, we cannot quantify beat/miss versus Street for Q4 2024 and Q3 2024 at this time. Attempted retrieval from S&P Global but rate limit prevented access.

MetricPeriodS&P Global ConsensusActualSurprise
Diluted EPS ($USD)Q4 2024N/A$(0.59) N/A
Total Revenue ($USD Millions)Q4 2024N/A$39.302 N/A

Note: Consensus estimates unavailable via S&P Global due to rate limits; will update when accessible.

Key Takeaways for Investors

  • Q4 print was intentionally “kitchen‑sink” to exit the consumer program; underlying profitability trajectory improves in 2025 as mix shifts to warehouse/construction‑perm and deposit costs continue to fall .
  • Margin expansion catalysts are tangible: digital repricing (~65 bps on ~$1B deposits), asset repricing ($350M loans at ~5.90% in 2025), and warehouse yields (SOFR+340 bps) .
  • Credit normalization outside the consumer book looks benign (core NCO ~0.05%), supporting lower provision run‑rate as warehouse scales .
  • Panacea remains a strategic asset with accelerating deposits and loan growth; deconsolidation could lift tangible book/value visibility without reducing FRST’s ~19% ownership .
  • Near‑term OpEx elevated by one‑time items; core operating expense burden guided to $21–$22M per quarter in 2025, providing operating leverage as revenue drivers scale .
  • Capital return intact and listing risks addressed: dividend maintained; repurchase program reauthorized; Nasdaq compliance regained with panel monitor .
  • Trading angle: watch for 1H25 updates on Panacea deconsolidation, warehouse balance ramp, NIM progression, and further deposit mix improvements—key catalysts for multiple re‑rating and TBV accretion .

Citations: Q4 2024 8‑K and exhibits ; Q4 earnings call transcripts ; Q4 press release ; Q3 press release ; Q2 preliminary press release ; Stock buyback/Nasdaq press .